Maharashtra rule could strike Rs100 crore off multiplex profits
The operating profit of the Indian multiplex industry could come down by Rs100 crore, if half of the movie-going population in Maharashtra begins to carry its own food and beverages to multiplexes, said a report by full-service ratings company CRISIL Ratings.
Earlier in July, minister of state for food and civil supplies Ravindra Chavan said people would be free to carry their own food to multiplexes in Maharashtra, and cinemas prohibiting people from bringing food from the outside would face strict action.
The statement assumes importance in the wake of a public interest litigation filed in the Bombay high court against cinema chains restricting personal food and charging exorbitant rates for food sold inside. The outcome of the PIL is awaited.
Maharashtra accounts for roughly a quarter of the revenues of multiplex operators. For most multiplex chains across the country, the overall growth in revenue comes from addition of screens, rise in food and beverage consumption as well as growth in advertising. For example, PVR Ltd witnessed a 16% rise in revenue from F&B, from ₹362 crore in FY15-16 to ₹422 crore in nine months of FY16-17. The share of F&B in PVR’s overall revenue has gone up from 26.4% to 27.1% during the same period. The overall F&B spend per patron went up from ₹40 in FY11-12 to ₹82 in FY16-17.
INOX Leisure Ltd’s F&B income has gone up from ₹162.3 crore FY14 to ₹306 crore in FY18. The share of F&B to the overall revenue of INOX went up by 7.7% from FY17 to FY18.
The gross profit margin of multiplexes in the F&B segment is about 75%, and in the advertising segment over 80%, according to CRISIL. In the fiscal year 2018, leading multiplexes reported an operating profit (EBITDA) of Rs. 58 lakh per screen. Of this, the gross profit generated by the F&B segment was Rs. 61 lakh per screen, while advertisements brought in Rs. 33 lakh per screen.
“Put another way, these multiplexes would have bled if their only source of revenue was ticket sales,” said Sachin Gupta, senior director, CRISIL Ratings, in a statement.
Apart from being highly profitable, non-ticket revenues are growing twice as fast as ticket sales, according to CRISIL analysis. The compound annual growth rate for non-ticket revenues was 29% in the past five fiscal years compared with 15% for ticket
revenues. As a result, share of non-ticket revenues has increased to 43% (of total earnings of multiplexes) in fiscal 2018 compared with 30% in fiscal 2013.
The analytics company estimates that multiplexes in the state will be required to hike ticket prices by Rs. 70 to offset the loss of F&B revenue, a move that may not go down well with movie-goers. The Indian movie industry is already grappling with what it deems unreasonably high ticket rates. The average ticket price at PVR for FY 16-17 is Rs. 196 while the rate for INOX for FY 16 is Rs. 170.
“Today, multiplexes account for half of the box-office collections despite having only one-fourth of the total movie screens in India,” said Nitesh Jain, director, CRISIL Ratings.”They are also the main attraction at shopping malls. Therefore, any disruption in multiplex operations will, apart from having a cascading impact on the film industry, will affect footfalls at malls, too.”
- Video streaming market in India to reach $5 billion by 2023: BCG report
- ‘Badhaai Ho,’ ‘Andhadhun’ benefit from ‘Thugs of Hindostan’ failure
- Friday film wrap: Post-Diwali week sees a bunch of small releases
- Netflix cancels ‘Narcos: Mexico’ red carpet due to LA wildfires
- Romances are very popular in India: Netflix’s Ted Sarandos
Editor's Picks »
- Facebook CEO Mark Zuckerberg says he hopes to work with Sheryl Sandberg for ‘decades’
- Won’t ‘abandon’ Saudi over Khashoggi killing: Donald Trump
- Renault names Thierry Bollore interim leader after Carlos Ghosn’s arrest
- India set to become the world’s biggest sugar producer
- How realty churn is affecting NCR, Mumbai builders